Planning for a successful bridging loan
Planning and careful planning defines a successful bridging loan. John Hardman, pictured, Head of Sales at Bridging Finance Solutions, offers his thoughts and insights on the 10 key factors to consider and action:
1. A well thought out proposal- whether it is development or auction purchase, applicants who have studied in depth not just the purchase but the following 12 months plan in detail are typically the ones where we have the best outcomes for all parties.
2. Credible exit strategy- if exit is sale then great but this in all probability will not happen within 3 months, making default on any short term bridging finance arranged a real possibility. At BFS we try and arrange all facilities over 12-18 months to give the client maximum flexibility.
3. Honesty- Sounds obvious but as a principle lender the ability to provide very quick ( and accurate ) decisions is based on the information we are provided with. If there is adverse credit or a ‘story’ behind a deal we are very relaxed about this and can act commercially to overcome these but we do need to see these factors at the beginning rather than part way through
4. Cash stake – whilst additional property can be used to enable 100% funding on some cases, it is always wise to have flexibility in the form of cash should the path not run true to plan in the coming months.
5. Astute Professional Team- Where property development is concerned, a clients direct experience is not crucial to us at BFS, but we always like to see a strong team surrounding them which will ensure the project is a success.
6. Good solicitor- A client needs to ensure that their solicitor is active in the short term bridging and development market, this ensures a timely execution in the most cost effective manner.
7. Knowledgeable Broker- Where a client intends to use a finance broker for their proposal it is always worth checking that the broker is well drilled in short term funding, this means being proactive from the initial enquiry through to assisting both lender and client when it comes to the legal process.
8. Additional Documents – At BFS, we continue to streamline our processes and ensure our due diligence is not too onerous. That said a client will always need to have documents to hand such as proof of cash stake, ID and bank statements so it always makes sense to organise this early on in the process.
9. Personal Service – At BFS, we ensure that the client or broker has a dedicated point of contact and we will meet, where possible, each applicant. The ability to transact with a person directly ensures that there is a level of trust very early on in matters and avoids frustration from a client’s perspective.
10. Consistency and Clarity – It is essential that any bridging loan or development loan has absolute clarity from the get go, we have the ability to make credit decisions instantly for a bridge and in respect of development we ensure that 100% of development costs can be covered after fees and charges before we push forward – we would never enter into a contract that looked likely to fail or fall short.